Councils 'needlessly' forcing elderly to sell homes to pay for care

Councils are failing to tell families of arrangements whereby they can keep
their homes and go into care

Councils are failing to inform people about schemes designed to stop them having to sell their homes to pay for elderly care, experts are warning.

Councils are required by law to offer "deferred payment" arrangements, which allow people to borrow money to pay for care against the cost of their home. The council lends the money and charges a low rate of interest which is paid, along with the capital borrowed, typically at the homeowner's death.

A number of councils have offered the schemes for many years, but it was only last year that every council was required to make the option available.

But care experts say little if anything is being done to promote awareness - leaving families under the imporession they have no choice but to sell their homes.

Owain Wright, founder of care advice provider Care Funding Guidance, said: "I think a lot of local authorities see it as poor use of council money. So even though they have to offer the scheme, they're choosing not to accept applications."

Some families he sees have been misinformed by council officials. "People have been told that the council doesn't actually do the scheme, and others just seem to decline it outright - sometimes without even looking at the application. If they think there's even the slightest chance that the cost of the loan will exceed the value of the property they will turn it down.

"Most people will sell the property, and put the money in the bank. With interest rates where they are, a more inefficient way of paying for care is difficult to think of," he said.

Paying for care can be a stressful process for older people and their families (Alamy)

Currently means-tested care means that if your assets are worth more than £23,250 you have to pay for your care yourself. When you whittle savngs down to this level, the council will start to help. But "assets" include homes, where other relatives can sometimes still be living.

Former accountant Peter Titman, 60, and his 89-year-old mother Joan, are in this position. Mrs Titman, who suffers from blindness and mobility problems, has been in a care home in Oldham, Lancashire, for nine months. She is happy in the home, but worried about the effect the cost of care is having on her savings and home.

Two months ago, Mr Titman sold his own home and moved into her house, a bungalow in Oldham. His mother has £27,000 in the bank - enough for a further three months of care before she hits the £23,250 watershed.

He has asked the council for guidance about what he should do, but they told him to come back when Mrs Titman's savings dropped to the £23,250 threshold.

Mr Titman originally moved into the house with the intention of buying it from his mother. But if he gives her the market value of the house, it will inevitably be used to pay for care - and it would mean she loses her means-tested benefits.

Although he is 60, the fact that he moved in after she went into care may disqualify him from exemptions that allow older or disabled relatives to stay living on in the homes of those who have gone into care.

"I don't need the money, I can pay for it, it's just frustrating," Mr Titman said. "She doesn't like seeing her house and savings going out from under her.

"It makes you think that saving isn't the best idea because someone who hasn't saved would get access to the care home straightaway, and the council would pay.

“I would give my mum the money now, but then she’d be in a worse situation because they’d stop her pension credit,” he said.

The following are among families' options when it comes to paying for care:

Set up a deferred payment scheme

All councils should offer this. A "deferred payment scheme" allows you to charge the cost of care against your house. It will then be charged in full after the person in care passes away, so if they are able, relatives can pay the debt back - otherwise they will have to sell.

Another way to ringfence some money if you're worred about losing everything to pay for care costs is to buy a "care annuity".

A lump sums is spent on an annuity which will pay for a set level of care depending on the person's age and health.

This can either last until the person dies or for a set period of years. It's a good investment if they live for longer - but because it's paid upfront, could be costly if they die soon. Some annuities allow for a partial refund if the person dies before the end of a set period, though this costs an extra fee.

The tax implications are also positive, said Mr James. "If the money goes directly to the care home, then it's tax-free."

Some people might be tempted to give away property to family or sell it for below market rate. This is an absolute no-no, said Mr James. "This is treated as 'deliberate deprivation of assets'. If you do give it away, local authorities can charge you based on what you would have owned if you hadn't done this."

Similarly, if a house is sold for below market rate, the person will be treated as if they had sold it for the full value, and the council will charge them accordingly. If they can't pay, they could end up in court.

Move in

There are some situations in which property is exempt from an elderly person's assets. Relatives who are under 16, over 60 or disabled can qualify to stay living in the home – as long as it’s their main residence and they moved in before the elderly person moved out. If a partner is still living in the home that also means the council won’t take it into account when working out a person's level of assets.

However, if they move in after the elderly person has left, the council might see this as an attempt to deliberately deprive the person of assets so they don't have to pay. There may be some discretion here.

Stephen Womack, financial planner at David Williams, said: "The room for manouevre is very limited. The council is more than likely entitled to take the property into account in helping to support the cost of care."

• Have you been rejected for a deferred payment scheme by your local authority? Let us know: olivia.rudgard@telegraph.co.uk